The embattled Lesotho Electricity Company (LEC) spent over M200 million on materials from various suppliers without signed contracts, Newsday has learned.
This shocking revelation is contained in a damning internal audit report seen by Newsday, which exposed widespread procurement irregularities at LEC, raising serious questions about the utility’s governance, financial controls, and commitment to transparency.
Covering procurement activities for goods and services in the 2023/24 financial year, the audit detailed a series of procedural breaches that auditors say expose the company to significant legal, financial, and reputational risks.
The report, prepared by LEC’s Head of Internal Audit, Thato Matsoso, and submitted to the Audit and Risk Committee, highlighted as one of its most alarming findings the lack of signed contracts for multi-million-maloti tenders awarded by the LEC Board of Directors in July 2023.
Despite the board’s clear instruction that formal framework agreements be drafted for each awarded lot, including price adjustment mechanisms linked to inflation indices from the Central Bank of Lesotho (CBL) and the South African Reserve Bank (SARB), auditors found no evidence that any contracts had been finalised or signed.
Procurement officials, according to the report, told auditors the draft contracts had been submitted to the Legal Department for finalisation, but there was no proof that these submissions ever occurred, nor any record of follow-ups or escalations to senior management.
In the meantime, procurement transactions continued with suppliers, including Lesehe, MM Building, and TJ Group, to the tune of over M200 million, all without signed contracts in place.
The company has been actively buying from these suppliers:
- M44.7 million to Lesehe for transformers and mini-subs
- M59.8 million to MM Building for meters
- M52 million to TJ Group for cables
- M28.5 million to TJ Group for circuit boxes and poles
- M15.2 million to Lesehe for miscellaneous hardware
This lack of contract oversight coincided with another red flag. Significant and unexplained price increases between the amounts quoted in suppliers’ original bids and the prices actually paid.
In some instances, the price variances ranged between 10 and 69 percent. Procurement staff could not provide any documentation to justify these changes, nor evidence that they had been reviewed and approved by the appropriate authorities.
The Procurement Manager blamed the delay in awarding contracts, nearly a year after bids were submitted in August 2022, for the price hikes. However, the audit notes that without formal review, the price adjustments are not only irregular but may be masking deeper problems, including possible collusion between suppliers and procurement staff.
“A lack of proactive contract management and oversight has created opportunities for collusion between suppliers and procurement personnel, where suppliers may submit artificially low bids to gain preference, knowing that prices will be inflated later,” the report read.
“LEC faces potential financial losses due to unsubstantiated price variations, increasing the risk of procurement fraud and unethical practices that could undermine the fairness and transparency of the procurement process,” it added.
The audit further revealed how procurement protocols were bypassed under the pretext of urgency. Before the Procurement Committee had formally approved recommended bidders, procurement staff initiated a separate process, issuing selective requests for quotations (RFQs) to suppliers already identified in the evaluation report.
Two suppliers, Big Potato and Southgate, were awarded contracts worth millions without the legally required competitive quotation process, a direct violation of Section 100 of the Public Procurement Act of 2023, which mandates that at least three quotations be obtained, even in emergencies.
Oversight failures also plagued the contractor approval process.
Phatsoane Construction, which was disqualified by the evaluation team for lacking a valid electrical certificate, later appeared on the final list of approved contractors and was awarded over M269,000 in service contracts.
Auditors found no explanation for how the company was reinstated, a lapse they warn could result in substandard or unsafe work.
“Despite disqualification, LEC engaged and continues to engage the company. According to SAP records, the total business awarded to Phatsoane Construction for works and services from FY23 to FY25 amounts to LSL 269,336.69,” the report read.
“Ineffective review mechanisms and lack of due diligence in the contractor approval process allowed discrepancies between the evaluation report and final approvals to go undetected.
“Selecting a contractor who does not meet qualification criteria may lead to substandard work, is a safety hazard and could lead to financial losses and regulatory compliance issues.”
The problems did not end there. Auditors found that LEC had no procurement plan for goods, services, or works for the 2023/24 financial year.
The Procurement Manager claimed that divisions failed to submit their procurement needs, yet no evidence was provided to show that such submissions were ever requested. The absence of a procurement plan has led to procurement delays, poor financial forecasting, and inefficiencies that have slowed LEC’s operations.
Pre-tender estimates, which are required by both the government’s Procurement Manual and the Public Procurement Act, were also missing for all 13 tenders reviewed by the audit team.
This total non-compliance has meant that procurement decisions were made without any benchmarks, increasing the risk of overpricing and budget overruns.
Meanwhile, the audit uncovered irregularities in how suppliers were registered. With the exception of connections contractors, there was no documented or standardised process for evaluating or approving suppliers included in LEC’s supplier database.
Supplier applications could not be provided for review, and decisions about inclusion appear to have been left to the discretion of individual procurement officers.
In one particularly alarming case, the auditors found that after the termination of a contract initially awarded to Tripple K for Lot 11, the work was reassigned to Big Potato in November 2023.
However, no documentation was available to verify the termination process. Nor was there any price renegotiation, even though the original pricing was based on a 90-day validity period that had long expired.
Instead, Big Potato submitted significantly higher prices, citing market inflation, a claim accepted without verification or benchmarking.
The audit concludes that ineffective internal controls, weak oversight, and poor documentation practices have undermined the integrity of LEC’s procurement processes.
Without urgent corrective action, the report warns, the utility risks continued financial losses, exposure to legal liability, and public backlash over poor service delivery and questionable spending.
